Making the Most of Your Retirement Plan

A quick question: what's your largest single asset? Ten years ago most people reading this article would have said their home was their largest single asset. We now know that because of changes in tax laws and the tremendous historical growth of the stock market most people say their retirement plans (IRA, 401(k), 403(b), Keogh) have the most value within their estate.

If you have accumulated significant funds in your tax-deferred retirement account, congratulations! Please remember, however, that these funds are tax-deferred not tax-free. As you know, you will pay taxes on the income you receive from your retirement plan but did you know your estate or plan beneficiaries also may have to pay taxes on whatever funds are left when you pass away? These taxes due upon your death may be as much as 70%!

You can gain peace of mind and reduce the tax burden of holding these retirement plan assets until your death. Instead of leaving these tax-deferred retirement assets to your family, who will pay resulting income taxes, consider designating the Methodist Medical Center Foundation as the named beneficiary of your qualified retirement plan. This designated gift will pass your assets free of estate and income tax and be used 100% in support of the mission of TCSC Foundation. Best of all, you gain the satisfaction now of knowing you will provide future support to touch lives in need.

In addition to naming TCSC Foundation as a beneficiary of your qualified retirement plan, you can also:

• at age 59 ½, begin making withdrawals from most retirement plans without having to pay an early withdrawal penalty. These withdrawals will still be subject to income tax but by taking out an amount sufficient to fund your charitable gifts, the taxes due can be offset by your charitable deductions which often results in a "wash" for tax purposes.

• transfer your IRA assets to a charitable trust. No taxes are due because the charitable trust is a tax-exempt entity. The trust provides an income to the beneficiary (you, your spouse, or family member) with an eventual gift to TCSC Foundation. The beneficiary pays income tax on payments from the trust but your estate receives an estate tax charitable deduction for the value of TCSC Foundation's right to eventually receive the trust assets.
• The procedure for naming TCSC Foundation as a beneficiary of your retirement plan is simple. Contact the administrator of your plan and ask for a beneficiary change form which typically asks the following information:
  • The foundation's full legal name: Methodist Medical Center Foundation
  • The foundation's permanent mailing address: 990 Oak Ridge Turnpike, Oak Ridge, TN 37830
  • The foundation's federal tax identification number: 62-1414205
  • Your relationship to the beneficiary: Charity

To find out more on making the most of your retirement plan, ask for a complimentary copy of "Questions and Answers about Retirement Plans" by calling Sharon Mullens at (865) 541-1872 or e-mailing her at smullens@covhlth.com.